TBR 4Q10 End-of-Quarter Benchmark Report


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Technology Business Research is a different kind of research company. Our bottoms-up approach provides a look at the technology industry unlike anything you’ve seen before. We analyze company performance in professional services, networking and mobility, computing and hardware, and software on a quarterly basis, leveraging our data to create industry benchmarks and landscapes that provide a business perspective on leaders and laggards and their business plans. We are experts in the business of technology.

The TBR Computing research team compiled information from the Fourth Quarter 2010 into this End-of-Quarter Benchmark Report. These supporting slides include information regarding segment views such as PC, x86 server, proprietary server, storage, and microelectronics. These segments are covered over different geographic areas such as the Americas, EMEA, and Asia Pacific. TBR provides insight and identifies trends, drill-downs, a market overview, and a quarterly focus.

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TBR 4Q10 End-of-Quarter Benchmark Report

  1. 1. Technology Business ResearchAccelerating Customer Success Through Business Research TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .
  2. 2. COMPUTER BUSINESS QUARTERLYSMEnd-of-Quarter Benchmark Report Fourth Calendar Quarter 2010Publish Date: April 6, 2011Authors: Ezra Gottheil, Greg Richardson, Krista Macomber,Cassandra Mooshian and Emily Searles – Analysts, ComputingContent Editor: John Spooner (john.spooner@tbri.com),Director, Computing TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .
  3. 3. Content TBRExecutive Summary Segment Views 3 Key Findings & Trends 10-12 PC 4-5 Drill-Downs 13-15 X86 Server Segment 16-18 Proprietary Server Geographic 19-21 Storage 6 Market Overview 22-24 Microelectronics 7 Market Leaders Geographic Views 8-9 Quarterly Focus 25-27 Americas IT vendors will differentiate products 28-30 EMEA with cross-platform operating systems 31-33 Asia Pacific and apps, pushing customer adoption 34-44 CBQ Financial Metrics and high-margin sales. Appendix 45-70 Additional Metrics IT vendors compete aggressively for 71-75 CBQ Taxonomy share in emerging Chinese cities, 76 TBR Capabilities targeting the region’s next growth frontiers.3 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  4. 4. Executive Summary TBRMobile devices will lay a foundation for client and infrastructuresystems growth through 2011Demand for • The emergence of new mobile devices – including tablets – will open doors to growthincreased opportunities for device and infrastructure companies in 2011.connectivity will • PC vendors will augment their portfolios with consumer and commercial mobile devicesdrive growth in to meet short-term demand and create longer-term upselling and cross-sellingmobile devices and opportunities.the infrastructure to • Server and storage vendors will benefit from the flood of new devices working their waysupport them on to networks, creating new demand for infrastructure to support the increased traffic. • As end-users increasingly push for personal data and apps on demand, TBR believesVendors will interoperability across the entire portfolio will be key to product differentiation andincreasingly leverage driving sales.new operating • A standardized operating system such as HP webOS, Apple iOS and Google Android acrosssystems and app the portfolio enables access to users’ content from any device, addressing this customerstores to differentiate requirement and providing for high-margin cross-selling opportunities.devices • In coming quarters, TBR anticipates vendors that do not embrace this trend will be challenged to drive unit and profit growth. • PC vendors are setting their growth sights on Western China, as companies jockey forVendors are targeting position to deliver multiple devices to a consumer market the industry deems under-expansion in Western penetrated.China to cultivate • Vendors are leveraging both portfolio and go-to-market changes, such as Acer’snew growth partnership with Founder, in addition to new investments in local facilities, including theopportunities establishment of Dell operations centers in Chengdu, to generate a strong feet-on-the- street presence.4 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  5. 5. Executive Summary TBRHardware vendors are supporting profitability by utilizing acquisitionsand alliances to expand their software and services capabilities Top LOB Key Changes & Drivers Top Rev. Keep on the Radar Growth The combination of a corporate refresh with HP We expect PC vendors will continue holiday consumer spending drove revenue for Apple to benefit from corporate refresh, PC PC vendors, while they shifted their focus to $11.5 while some will struggle to stay 22.0% mobile device offerings, such as tablets. billion ahead of mobile trends. HP TBR expects vendors to manage Virtualization and corporate refresh drove HP attrition to the cloud by leveraging x86 Server sales of x86 servers in 4Q10. $3.4 solution-based offerings with x86 17.0% billion servers. Vendors pushed to associate increased ROI IBM Vendors will drive revenue growth by IBMProp Server with proprietary servers, driving sales and $2.4 complementing proprietary server countering the effects of x86 server migration. 32.9% capabilities with distributed systems. billion Vendors ramped up acquisitions while building EMC TBR expects the massive influx of out comprehensive portfolios that deliver NetApp unstructured data and drive to move Storage integrated solutions, capitalizing on customers $1.9 into virtual environments will 32.3% transitioning to the cloud. billion continue through 2011. TBR believes the March earthquake Mobile devices are driving strong demand for Intel in Japan, which resulted in Micro- IBM NAND flash memory, which suffered a drop in $11.5 production disruption for Toshiba,electronics supply after a power outage at Toshiba plant. 27.8% Fujitsu and Sony, will cause billion microelectronic shortages in 2011.5 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  6. 6. Executive Summary TBREmerging markets will continue to lead growth entering 2011, asbusinesses build out IT infrastructures to growing network usage Top Geo Key Changes & Drivers Top Rev. Keep on the Radar Growth United HP TBR anticipates resurging Vendors worked to increase marketing capabilities Apple consumer demand in 2011 States/ to drive consumer sales, augmenting the effects $14.2 57.3% will boost performance in the Americas of an enterprise IT refresh cycle. billion Americas. TBR believes stabilizing Vendors worked to expand their channel HP Apple economic conditions will presence, with a focus on the region’s growth EMEA $12.3 drive increased customer markets, to grow revenue despite challenging 49.2% billion spend and resulting revenue macroeconomic conditions. growth in EMEA. We expect healthy demand in CBQ companies targeted China as a key lever for Panasonic Apple emerging markets to offset growth in APAC in 4Q10, as the country’sAsia Pacific $21.2 the effects of Japan’s March expansive consumer market and comparatively 149.3% billion earthquake and drive APAC strong economy yield high customer demand. growth in coming quarters. TBR believes hardware Emerging markets such as the BRIC countries remained a key target for growth, vendors will work to deliver as vendors worked to expand channel partnerships and deliver new products infrastructure and need-Emerging and need-based solutions while increasing marketing capabilities to grow specific solutions to capitalizeMarkets brand awareness and drive sales. This is particularly evident in the SMB and on demand in emerging midmarket sectors, as customers strive to leverage IT to grow their businesses markets, helping drive overall amidst economic recovery. growth.6 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  7. 7. Executive Summary TBRMobile PCs and virtualization drove consumer and commercial demandfor hardware, software and services, implying multifaceted growth 4Q10 REVENUE GROWTH VS. OPERATING MARGIN• Consumer demand improved, TBR partly as a result of the holiday 80% season, boosting revenue for Apple vendors with strong offerings 60% catering to the market, such as Apple. Vendors, including Acer, Panasonic 40% saw continued weakening Revenue Growth NetApp demand in netbooks declining Lenovo EMC Avg. Revenue Growth revenue. 20% Toshiba Sony Dell HDS IBM 11.1% Intel• Large hardware vendors such as Fujitsu HP 0% HP, Dell and IBM focused on 0% 10% 20% 30% 40% AMD integrating technology and Acer services from recent acquisitions -20% Avg. Operating Margin to broaden their portfolios, Oracle/Sun 12.9% bundling hardware with software -40% and services to expand globally SOURCE: TBR Operating Margin and grow commercial revenue. NOTE: SPHERE SIZE DEPICTS SIZE OF REVENUE.7 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  8. 8. Executive Summary TBRHardware vendors enhance their product portfolios and expand theirchannel traction to provide for sustainable revenue and margin growthRevenue, Growth & Operating Margin LeadersCompany Size Key Strategy Drivers & Changes Expand portfolio of consumer products to target HP grew share in all PC segments, posting double- $32.3HP emerging markets while driving sales of converged digit server and storage growth while significantly billion infrastructure to enterprise customers increasing commercial sales of printing hardware. Capitalize on the continued server refresh cycle and IBM is coupling POWER servers with Smart Analytics, $29.0IBM bundle System x and System z servers as part of CloudBurst and POWER VM capabilities to drive billion larger, integrated solutions revenue of mainframe and x86 servers. Panasonic is coupling Toughbooks with display and $27.7 Target new growth verticals with bundled solutionsPanasonic video technologies to cross-sell PCs, displays, TVs and billion to diversify and increase revenue base projection equipment for profitable growth.Company Growth Key Strategy Drivers & Changes Leverage brand image and innovative design to gain Apple delivered innovated design and lightweightApple 70.5% share of the consumer market mobile platforms to consumers to drive sales. Revenue growth was driven by strong consumer Leverage demand for packaged solutions and greenPanasonic 31.6% demand for and resulting sales within its home technology to drive growth appliances, PEW and PanaHome and Other products. Couple low-end penetration with a recently NetApp posted nearly 50% year-to-year midmarketNetApp 25.3% upgraded portfolio, including the latest edition of unit growth in 4Q10, driving strong corporate Data ONTAP, to generate upselling opportunities performance.Company OM % Key Strategy Drivers & Changes Augment higher enterprise sales and lowered COGS Intel’s operating margin climbed 143 basis pointsIntel 37.9% due to 32nm manufacturing with traction in new annually in 4Q10 on the back of rising ASPs and high-margin markets via portfolio expansion strong corporate revenue growth. Leverage innovative products and aggressive Improving component prices coupled with increasedApple 29.3% marketing to maintain a strong reputation around iPad and iPhone 4 sales resulted in strong margin products and services, driving growth and margins performance for Apple in 4Q10. Innovate to deliver technologies that improve the Falling microprocessor ASPs, coupled with strongAMD 25.0% end-user experience on visual and data-intensive sales of new Fusion APUs, enabled AMD to maintain applications increasingly adopted by customers industry-leading margins in 4Q10.8 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  9. 9. Executive Summary: Quarterly Focus TBRIT vendors will differentiate products with cross-platform operatingsystems and apps, pushing customer adoption and multi-device salesComputing companies are leveraging cross-platform operating systems and app stores toenable users to access content from any device. This strategy has positioned vendors forcross-selling opportunities and to meet emerging demand for apps and personal data on-demand. • HP is rolling out a webOS-based tablet and smartphones, and integrating the operating system into its traditional PCs in late 2011, to provide seamless wireless synchronization of key personal information across devices. • With iOS, Apple provides interoperability across the entire portfolio, enabling the vendor to leverage strength in one product line to drive sales of a weaker product line. • Vendors selling Google Android-based devices stand to benefit from platform standardization as well; for example, the integration of smartphones with Google TV provides end-users a number of options, such as using the phone as a remote for the television, and cross-device access to the Google Android app market and games. As users migrate to mobile devices, TBR believes a “human-centric” view will position vendors to drive revenue, unit and profit growth through 2011. • TBR believes the shift from a “device-centric” sales strategy to delivering a portfolio of unified offerings is significant to drive growth, as companies are able to bundle devices into larger, high- volume and high-margin deals. • We anticipate companies that are slow to adopt cross-device interoperability and access to app stores will face headwinds in the market, as these features emerge as competitive differentiators and key levers to accelerate revenue and margin growth.9 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  10. 10. Executive Summary: Quarterly Focus TBRComputing vendors are competing for share in emerging Chinese citiesto accelerate revenue and unit growth through 2011PC companies are expanding in China to capture growing consumer demand Map of Dell’s China facilities PC vendors are upping the ante for growth in China, focusing on regional Dalian – International service center Shanghai – partnerships and expansion in lower-tier cities. By transferring attention R&D and from target markets in Eastern China to less developed parts of Western product China, PC vendors are aiming to build brand affinity early in consumers’ design minds to sell multiple connected devices. Chengdu – ManufacturingAcer and customer Acer will leverage a sales, marketing and development partnership with support centers China-based Founder to expand its reach in the country while simultaneously developing region-specific products to help accelerate adoption. Xiamen – Two manufacturing facilities; one enterprise command centerDell Dell is investing $100 billion over 10 years in manufacturing, customer Existing Dell China location service, sales and marketing in Western China to expand its addressable New Dell China location market by increasing its feet-on-the-street presence in tier-one and tier-two cities.HP HP will leverage the interconnectivity of its webOS devices to demonstrate innovation and quality, helping shed the negative quality image the company was exposed to in late 2010 as a result of faulty notebooks.Lenovo Lenovo employed its “Protect and Attack” strategy to gain share and remain the incumbent in China’s PC market while expanding in Western China via transactional sales and mobile devices.10 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  11. 11. Segment View: PC TBRPC vendors will leverage differentiated consumer PC lineups andexpansion in emerging markets to drive growth through 2011• Overall seasonally increased consumer spend coupled TBR 4Q10 YEAR-TO-YEAR PC REVENUE GROWTH VS. CORPORATE REVENUE GROWTH 75% with corporate refresh drove Apple strong performance for most vendors. Acer’s large bet in 60% netbooks is plaguing the company’s unit sales, as Corporate Revenue Growth 45% netbook sales succumb to Average Corporate Panasonic tablet cannibalization. Revenue Growth for Average PC Revenue 30% Segment = 17.2% Growth = 11.0%• PC vendors shifted resources Lenovo to emerging markets to 15% position for growth through HP Toshiba 2011. Dell Sony 0% -10% -5% 0% 5% 10% 15% 20% 25% 30% Acer -15% PC Revenue Growth SOURCE: TBR NOTE: SPHERE SIZE DEPICTS SIZE OF REVENUE.11 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  12. 12. Segment View: PC TBRCBQ vendors are integrating mobile devices into their PC segmentsto enhance consumer offeringsPC Revenue LeadersCompany Size Key Strategy Drivers & Changes HP grew share in all PC segments and increased Leverage scaled, commodity product sets and resulting $11.5 profitability due to falling component prices andHP increased profitability compared to peers to combat billion greater revenue from higher-margin commercial weak consumer spending segments. Notebook PC revenue increased 4.2% year-to-year, Dell will no longer forfeit PC profitability to win on as 4.3% unit shipment growth offset a slightly $7.9 price; the company will improve PC gross margins,Dell depressed ASP. Desktop revenue grew 3.7% year-to- billion enabling investment in sales and R&D for sustainable year, as 3.2% unit shipment growth augmented a growth. slight uptick in ASP. Maintain a solid customer base by enhancing and $5.4 Lenovo will leverage its partnership with NEC toLenovo updating all “Think-brand” PCs, and introducing these billion expand its reach into Japan in 2011 and beyond. products into emerging marketsPC Revenue Growth LeadersCompany Growth Key Strategy Drivers & Changes Apple maintains a premium market positioning, Release of the new MacBook Air drove PC revenue.Apple 22.0% touting its reputation for innovative products and The device’s popular light weight and portability led quality service to drive sales. to strong initial adoption. Corporate refresh and consumer sales of Idea-brand Maintain commercial customer base in China with products drove notebook revenue, while success ofLenovo 21.4% enhanced Think-brand PCs while driving brand all-in-ones, coupled with SMB desktop products, recognition to gain share in emerging markets yielded strong desktop performance. Sony is investigating 3-D technology as a product line Sony separated its Vaio PC line into two tiers toSony 18.5% differentiator in an attempt to drive sales. The increase global awareness and unit sales. company revealed its Vaio 3-D laptop in 4Q10.12 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  13. 13. Segment View: PC TBREnterprise refresh remains the vehicle for growth, with portabilityand integrated solutions driving PC innovation for growthTrends & Outlook• TBR believes PC vendors will work to drive growth in tablets and PCs in the coming quarters, highlighting tablets as tools for consuming data, while touting the traditional compute capabilities of PCs, particularly in commercial markets.• TBR anticipates the enterprise PC refresh cycle will support unit and ASP growth in 2011.• TBR anticipates consumer PC demand will face headwinds in 2011, namely in China. We believe certain Tier 1 and Tier 2 areas, such as Beijing, are entering saturation, as post-recessionary refresh cycles of traditional PCs slow. We expect a shift in focus to new devices, such as tablets, and other emerging markets, such as India and China’s rural areas, for growth.Portfolio/GTM & RM Changes Key 4Q10 M&As, Alliance Changes & DealsCompany TBR Insights Company TBR Insights In January, Acer released new Aspire notebooks Acer and Ducati Motorcycle Company formed an and netbooks based on the AMD E-series alliance in 4Q10 under which Acer will provideAcer accelerated processing unit for improved Acer hardware, including high-performance mobile consumption of high-definition entertainment, devices for the development and testing of multitasking and power savings. Ducati motorcycles. HP introduced the DreamScreen 400 in India. TBR views the product as significant, with real Fujitsu signed OEM agreement with Ncomputing potential as a first consumer device in emerging with the intent to integrate Ncomputing’s 64-bitHP markets, and eventually as a simpler PC for users vSpace virtualization and NUMO(TM) system Fujitsu Fujitsu’s with its PC, servers and services to worldwide who do not need standard software support and PC complexity. provide fully integrated multi-workplace solutions optimized for SMB customers. Dell will leverage tablets to buck its recent headwinds in the consumer market. TheDell company announced it will deliver 10-inch Android and Windows 7-based systems in 1H10, aiming to shed the image of its initial, 7-inch Streak device, which faced adoption challenges.13 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  14. 14. Segment View: x86 Server TBRX86 vendors with strong hardware roots continue to capitalize onenterprise demand TBR 4Q10 x86 REVENUE GROWTH VS. CORPORATE REVENUE GROWTH 10% IBM• TBR expects cloud-related HP integration, enterprise Dell demand and emerging 0% markets will continue to -50% -40% -30% -20% -10% 0% 10% 20% drive x86 server sales Corporate Revenue Growth Acer throughout 1H11 for top -10% Average Corporate Revenue Growth for Segment: -5.2% vendors.• HP, IBM and Dell achieved Average x86 Revenue Growth = -3.6% strong x86 revenue growth -20% in 4Q10, driven by enterprise replacement of older x86 models. Oracle -30% continued to struggle to Oracle/Sun compete in the hardware -40% market, showing x86 Revenue Growth significant decline in x86 SOURCE: TBR revenue. NOTE: SPHERE SIZE DEPICTS SIZE OF REVENUE.14 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  15. 15. Segment View: x86 Server TBRVirtualization and corporate refresh drive double-digit growth of x86server sales, while putting the squeeze on proprietary server offeringsx86 Server Revenue LeadersCompany Size Key Strategy Drivers & Changes Relying on price, R&D, sales and marketing, HP has The acquisition of Vertica Systems enables data $3.4HP increased its market share in x86 servers during most analysis and faster distribution of results, billion quarters over the last four years. contributing “pull” to HP server sales. Capitalize on higher demand for infrastructure supporting In 4Q10, Dell’s server business benefited from $2.1 mobile devices, including servers, to handle increasedDell the company’s solutions strategy and Perot billion Internet datacenter traffic and mobile device management acquisition, growing revenue by double digits. solutions for new devices in business environments. TBR believes IBM is capitalizing on growing demand for To employ its analytics strategy in x86 servers, $1.8IBM x86 servers in cloud and virtualized datacenters to support IBM announced newly enhanced Smart billion high-end growth of System x servers. Analytics System 5600 models.x86 Server Revenue Growth LeadersCompany Growth Key Strategy Drivers & Changes Leverage acquisitions, including 3Par, and a strong HP is capitalizing on the continued enterpriseHP 17.0% Converged Infrastructure strategy to drive x86 unit refresh as well as its efforts to sell bundled and shipment and revenue growth integrated solutions to drive x86 growth. Drive solutions sales of servers, storage and services to Revenue growth was driven by strong demandDell 15.9% enterprise customers for increased revenue and profit for both blade and rack servers from enterprise growth and SMB customers during the quarter. System x continued on a double-digit growth Capitalize on the continued server refresh cycle and trajectory, led by more than 30% year-to-yearIBM 15.8% bundle System x as part of larger, integrated solutions to growth in high-end System x. As a result, drive x86 revenue growth revenue increased 15.8% year-to-year to $1.8 billion in 4Q10.15 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  16. 16. Segment View: x86 Server TBRVendors continue to drive revenue by touting ROI with powerful,efficient x86 servers Trends & Outlook • Demand for private and public cloud environments will facilitate increased sales of x86 servers bundled with software, storage and services through 2011, as customers seek integrated and optimized solutions to increase efficiency. • Converged infrastructure strategy and an established presence in the lower-end of the server market will continue to make HP the market leader in x86 servers, while IBM and Dell fight for second. • TBR believes vendors will continue to differentiate between low-end and high-end servers in the market, driving growth of performance-per dollar machines, while constraining the growth of Unix-based servers. Portfolio/GTM & RM Changes Key 4Q10 M&As, Alliance Changes & Deals Company TBR Insights Company TBR Insights Fujitsu’s strategic transition to x86 servers will increase upselling and cross-selling opportunities Dell dove deeper into virtualization deals with as it shifts away from mainframe and UNIX. the Chicago Board Options Exchange (CBOE). Fujitsu Fujitsu will face increased competition in the x86 Dell Dell replaced CBOE’s Sun x86 servers with Dell from Dell, HP and IBM, making gains in market x86 servers to create a high-performance IT share slow. environment. HP continued to increase x86 market share in Payroll Processor Paycor chose the HP ProLiant 4Q10, similar to every quarter for the past four DL980 G7 server as its legacy system upgrade. HP years. x86 servers, coupled with commodity HP Paycor will leverage HP’s unified management products, resulted in lower margins in 4Q10 for framework to manage its mixed environment HP versus its competitors. of servers. AMD increased its Opteron Series family with five new products, powered by its 8- and 12- core x86 IBM partnered with AMD for its pieces of its AMD processors. These new server CPUs specifically IBM/ System x server line. IBM uses this system as a target SMBs with increased performance-per- AMD part of a larger integrated solution that will dollar through reduced power consumption. drive revenue growth through 2011.16 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  17. 17. Segment View: Proprietary Server TBRIBM leveraged a refreshed System z platform to drive revenue growthand create new hurdles for competitors in an already challenged market 4Q10 PROPRIETARY SERVER REVENUE GROWTH VS CORPORATE REVENUE GROWTH• TBR believes the high-cost, TBR 10% low-volume nature of the proprietary server market, HP IBM compounded by increasing 0% competition from x86 options, -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% is hindering growth and Corporate Revenue Growth widening the gap between -10% competitors. Average Corporate Revenue• Mainframe upgrades drove Growth for Segment = -8.3% -20% IBM proprietary server revenue in 4Q10. Proprietary Average Proprietary servers remain an important -30% Server Revenue Growth = -9.4% offering for HP to deliver on Oracle/Sun client needs; however, revenue growth is challenged -40% Proprietary Server Revenue Growth by competition and new SOURCE: TBR technologies. NOTE: SPHERE SIZE DEPICTS SIZE OF REVENUE.17 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  18. 18. Segment View: Proprietary Server TBRIBM is embracing demand for virtualization and cloud-ready serversby tailoring System z to integrate with distributed systemsProprietary Server Revenue LeadersCompany Size Key Strategies Drivers & Changes IBM shows that cloud is not simply an x86 play by $2.4 IBM is coupling POWER servers with Smart Analytics, delivering cloud capabilities on Power and System zIBM CloudBurst and POWER VM capabilities to drive billion platforms, demonstrated by use cases such as Linux revenue. on System z. Capitalize on customer uncertainty around cloud by TBR anticipates headwinds for HP’s high-end server $555 bundling inherent skill sets and technologies, business, as Oracle cuts support for ItaniumHP including server hardware, in ways that address processors in a move to disrupt HP’s Integrity server million emerging end-customer datacenter needs line and shift customers to SPARC servers. Oracle introduced Oracle VM for Sparc, an applicationOracle/ Leverage strength in software, such as Oracle $454 delivery platform cloud using Sun Sparc T series that WebLogic Server application server, to assistSun million allows customers to migrate mission-critical customers in transitioning to the cloud applications to a virtual environment.Proprietary Server Growth LeadersCompany Growth Key Strategies Drivers & Changes The mainframe refresh cycle drove adoption of IBM’s Drive growth by moving new datacenter workloads latest System z offering, the zEnterprise 196. System z to System z, while simultaneously expandingIBM 32.9% revenue rose 65.0% year-to-year to $1.5 billion in System z’s install base by targeting key mainframe 4Q10, while MIPS grew 58% year-to-year – its largest customers in emerging markets gain in over six years. Leverage Converged Infrastructure solutions of Strong commercial spending and sales of ConvergedHP –0.2% hardware, software and services to defend Infrastructure solutions resulted in unit shipment and datacenter presence from attrition to the cloud revenue growth in 4Q10 for HP’s high-end servers.Oracle/ Oracle will leverage Suns top 4,000 customers to Oracle introduced the Sparc-based hardware rollouts, –4.6% sell products directly while focusing on integrated such as the M5000 servers, to improve its strugglingSun systems, including servers. hardware business.18 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  19. 19. Segment View: Proprietary Server TBRVendors will bundle high-end servers with storage and softwareto develop integrated solutions for virtual environments Trends & Outlook • TBR believes pent-up demand in financial and telecommunication institutions will drive proprietary server revenue in 2011 as a result of refreshed products and the long refresh cycle coming out of the recession. Growth will continue to soften, however, as the performance gap between less expensive servers narrows. • We expect IBM System z to continue posting double-digit revenue growth through 2011. IBM will leverage its System z BladeCenter Extension, which enables the unified management of POWER, System x and workload accelerators with System z to spur revenue growth throughout its hardware segment. Portfolio/GTM & RM Changes Key 4Q10 M&As, Alliance Changes & Deals Company TBR Insights Company TBR Insights IBM will leverage the strategic promotion of the integrated solutions to solve Lenovo formed a joint venture with NEC to business needs. IBM will combine tap into the high-end server market in IBM POWER Servers with Smart Analytics, Japan. The joint venture will leverage Cloud Burst and Power VM to drive Lenovo Lenovo’s low-cost manufacturing model revenue and profit growth. with NEC’s high-margin products, enhanced market position and distribution Fujitsu has ample opportunity for growth channels. within the supercomputing segment due to the demand for large amounts of data to be processed using proprietary Fujitsu servers. Despite difficult competition within the x86 market, Fujitsu continues to be a leader in the high-end proprietary server market.19 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  20. 20. Segment View: Storage TBRIncreased demand for virtualized and cloud environments lays thetrajectory for growth in an increasingly consolidated storage market 4Q10 STORAGE REVENUE GROWTH VS CORPORATE REVENUE GROWTH• On average, storage vendors TBR 30% maintained double-digit NetApp growth, as emerging cloud and EMC 20% virtualized infrastructures created demand for scalable, Average Corporate Revenue Growth for segment = 5.3% HDS unified storage, and the strong 10% Corporate Revenue Growth value proposition of high Dell IBM HP storage utilization spurred 0% corporate spending. -30% -20% -10% 0% 10% 20% 30% 40%• TBR believes smaller players, -10% such as NetApp and HDS, will Average Storage Revenue Growth = 8.1% rely on a strong ecosystem of -20% channel, OEM and technology partners to keep pace with the -30% growing multiplatform vendors Oracle/Sun investing heavily in acquisitions to expand their -40% Storage Revenue Growth storage portfolios and target SOURCE: TBR key growth markets within the NOTE: SPHERE SIZE DEPICTS SIZE OF REVENUE. industry.20 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  21. 21. Segment View: Storage TBRStorage vendors enhance their unified storage portfolios to break intovirtualized and cloud-based datacenters and drive strong growthStorage Revenue LeadersCompany Size Key Strategy Drivers & Changes Transition from an information storage provider to a EMC posted double-digit growth in both high-end $1.9 serverless infrastructure company with an integratedEMC and mid-tier platform products, driven by strong billion solutions strategy to address a wider range of demand for Symmetrix and BRS offerings. customer data requirements Leverage acquisitions, such as XIV for high-end IBM’s storage revenue increased 8.0% year-to-year to customers and Storwize for the midmarket, and $1.2 $1.2 billion with more than 20% storage revenueIBM create new pools of data with Smarter Planet and billion growth in Growth Markets, demonstrating the Analytics strategic initiatives to drive consistent company’s efforts to expand in emerging markets. storage revenue growth through 2011 HDS is expanding its Universal Storage Platform to HDS introduced the Hitachi Clinical Repository (HCR) $1.0 capitalize on customer migration to virtualizedHDS solution in 4Q10 to gain traction in the high-growth billion environments, driving unit shipment growth by healthcare market. solving specific customer datacenter needs.Storage Growth LeadersCompany Growth Key Strategy Drivers & Changes Meet growing demand for cloud computing and NetApp utilized its recently upgraded portfolio, virtualization by leveraging acquisitions, partnerships including the latest edition of Data ONTAP, toNetApp 32.3% and product development to expand the unified capitalize on upselling opportunities, driving storage portfolio increased midmarket and high-end demand. Leverage Greenplum and Isilon Systems as a means Storage hardware revenue increased 16.0% year-to-EMC 16.0% to expand in key growth markets, including cloud year and 17.0% sequentially to $1.89 billion, computing and Big Data storage and management. accounting for 38.8% of EMC’s total revenue. TBR believes the addition of networking, previously a Couple 3PAR and “drop-in acquisitions” on the corporate investment, to HP’s Enterprise Storage andHP 13.8% software side with bundled consulting services to Servers business in 4Q10 lays the foundation for defend datacenter presence from attrition to cloud. increased IT-as-a-Service and storage sales.21 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  22. 22. Segment View: Storage TBRVendors acquire to win leadership in key growth areas such as cloudand big data verticals, driving a diversified, sustainable growth runwayTrends & Outlook• Storage is an adjacent hardware business that has emerged as a key strategic lever, as CBQ vendors aggressively ramp up acquisition activity, such as Dell’s purchase of Compellent and HP’s snatching up of 3Par, to augment their core capabilities and penetrate high-growth areas of the storage market.• CBQ vendors continued building out their unified storage portfolios to deliver comprehensive, integrated solutions and capitalize on new demand for storage in cloud computing and virtualized datacenters.• As the pool of unstructured and object data, such as medical records, grows, TBR anticipates storage vendors will increasingly bundle hardware, software and services into solutions that address vertical-specific needs.Portfolio/GTM & RM Changes Key 4Q10 M&As, Alliance Changes & DealsCompany TBR Insights Company TBR Insights EMC positioned to enable channel partners to act NetApp acquired Akorri Networks for improved as a spearhead in midmarket adoption by virtualization deployment services. NetApp delivering a restructured midmarket portfolio – NetApp acquired LSI-Engenio to expand into the the VNX and VNXe – and reseller program. server-attached and embedded storage markets.EMC EMC Greenplum integrated Cloudera’s Distribution EMC introduced two additions to its arsenal of for Hadoop software into its Chorus enterprise hybrid cloud-enabling solutions to beef up its analytics and data warehousing platform. EMC image as an end-to-end cloud and storage-as-a- In 4Q10, EMC acquired scale-out NAS vendor service provider and capture greater share of the Isilon Systems. key growth market. Dell signed agreements to acquire virtualized NetApp rolled out FlexPod, a FAS3200, scalable storage vendor Compellent Technologies and and cloud-ready storage architecture built jointly Dell Security-as-a-Service provider SecureWorks.NetApp with Cisco and VMware that is delivered through In early January, Dell acquired InSite One Inc., a service partners. cloud-based medical archiving company.22 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  23. 23. Segment View: Microelectronics TBREnterprise PC and server refresh cycles support current growth, whileemerging devices hold the keys for accelerated performance• Increased PC and server 4Q10 MICROELECTRONICS REVENUE GROWTH VS. CORPORATE REVENUE GROWTH TBR demand due to the continued 10% corporate hardware refresh cycle spending supported chip Intel sales, keeping the average 8% year-to-year microelectronics IBM Toshiba revenue growth rate above Corporate Revenue Growth 6% corporate growth for the segment. Sony 4% Average Corporate Revenue• TBR believes semiconductor Growth for Segment = 5.3% manufacturers are increasingly 2% Average looking to technology and Microelectronics Revenue channel partnerships to cost- AMD Growth = 13.9% effectively develop and drive 0% -5% 0% 5% 10% 15% 20% 25% 30% sales of comprehensive chipsets targeted at key growth -2% devices, such as tablets and SOURCE: TBR other mobile devices, to lay the Microelectronics Revenue Growth foundation for strong performance in 2011. NOTE: SPHERE SIZE DEPICTS SIZE OF REVENUE.23 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  24. 24. Segment View: Microelectronics TBRHardware vendors focus on efficient manufacturing processes anddeveloping chips catering to higher-margin devices to position for strongperformance Microelectronics Revenue Leaders Company Size Key Strategy Drivers & Changes Intel is ramping investment to augment revenue Intel’s server segment led all business segments in $11.5 from its core markets, including PCs and servers, percentage of total revenue, increasing to 22.0% of Intel with growth in the mobile and embedded overall revenue in 4Q10 as a result of accelerated billion consumer electronics markets. customer adoption of cloud environments. Toshiba is shifting from its LSI business to NAND Power outages at a Toshiba NAND manufacturing $3.3 flash technology to ride the wave of mobile facility resulted in a 20% loss in chip shipment during Toshiba device demand while reducing the risk of volatile December and January, causing a significant setback billion LSI product demand. for the vendor in the high-opportunity market. AMD ramps R&D spend into high-end gaming AMD launched and reported strong customer $1.6 AMD processors and graphics cards to capitalize on adoption of Accelerated Processing Units (APUs), billion strong demand and drive high-end sales. dubbed Fusion, in 4Q10. Microelectronics Revenue Growth Leaders Company Growth Key Strategy Drivers & Changes IBM is leveraging the introduction of high-end Increased demand from networking and game IBM 27.8% systems and strong partnerships with game console chip customers drove a fourth consecutive console manufacturers to drive segment growth. quarter of microelectronics revenue growth. Sony piggybacks semiconductor sales on demand Sony integrated Flash memory into the new PSP2, Sony 24.8% for PCs and partnerships with gaming console replacing the platform’s older technology and manufacturers. spurring semiconductor demand. Toshiba is leveraging its new 24nm manufacturing Mobile devices, such as smartphones, boosted demand for semiconductors; coupled with cost- Toshiba 8.5% process for flash memory to drive demand as well reduction, this drove a significant year-to-year as revenue and margin growth. improvement to semiconductor operating income.24 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  25. 25. Segment View: Microelectronics TBRNew applications, including in mobile devices and Internet-connectedTV, will drive microelectronics revenue throughout 1H11Trends & Outlook• Rising sales of PCs and servers, largely due to the business refresh cycle, drove semiconductor demand in 4Q10.• Chipmakers’ development of processes boosting chip production efficiency, such as Toshiba’s 24nm manufacturing, coupled with restructuring efforts to align operations with higher-margin technologies yielded improved profitability in 4Q10.• TBR expects Intel to experience a setback in 1H11, as it takes on expenses and revenue losses due to a flaw in the Series 6 chipset for its latest Sandy Bridge processor. Portfolio/GTM & RM Changes Key 4Q10 M&As, Alliance Changes & Deals Company TBR Insights Company TBR Insights AMD rolled out new FirePro graphics cards, which Toshiba purchased the remaining 19.9% of Toshiba offer efficient support for various displays, Storage Device Corporation (TSDC) from its partner targeted at the medical, financial, design and Fujitsu to gain greater control and advancement in AMD engineering verticals. NAND flash memory. AMD rolled out Embedded G-Series low-power Toshiba To shift focus away from low-end, non-memory chip processors for improved x86 performance. production, Toshiba will sell its factory producing Intel rolled out its new Sandy Bridge processors to cell graphic chips used in PlayStation 3 to Samsung add value for customers and improve performance and its system LSI chip facility to Sony. via increased platform integration on its platform. Intel’s partnership with Bang & Olufsen will increase Intel Intel announced Atom SoC processors to gain its presence in the market for devices enabling Intel Internet-connected TV – a key growth market Intel entrance into rapidly growing verticals, including the automotive and healthcare industries, via has yet to infiltrate. embedded applications such as in-vehicle information and entertainment systems.25 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  26. 26. Geographic View: Americas TBRA strong enterprise presence and marketing capabilities in the consumersector are benefiting winning hardware vendors in the Americas • Growth in the Americas 4Q10 AMERICAS REVENUE GROWTH VS. CORPORATE REVENUE GROWTH TBR remained in the double 80% digits in 4Q10, driven by Apple improving customer 60% spending in the region. Corporate Revenue Growth • Apple led CBQ companies 40% Panasonic in growth in the Americas, Average Corporate Revenue NetApp Growth for segment = 11.1% HDS EMC Lenovo while Panasonic overcame 20% Sony Intel Toshiba NetApp to regain its Fujitsu Dell IBM position as the runner-up 0% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 70% and AMD accelerated Acer HP AMD growth to achieve the No. 3 -20% ranking. TBR attributes Oracle/Sun Average Americas Revenue Growth = 10.5% leading performance -40% primarily to the ongoing SOURCE: TBR Americas Revenue Growth NOTE: SPHERE SIZE DEPICTS SIZE OF REVENUE. enterprise refresh and demand for differentiated products in the high-end consumer market.26 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  27. 27. Geographic View: Americas TBRHardware vendors increase traction in the private sector via refreshedportfolios to overcome weak federal and consumer spend in the region Americas Revenue Leaders Company Size Key Strategies Drivers & Changes HP is increasingly relying on Canada and Latin Growth in the Americas in 4Q10 is primarily $14.2 HP America for new growth in the Americas, as the attributable to strong sales of enterprise hardware, billion mature U.S. market grows comparatively stagnant. including Super Dome 2 systems. IBM leverages its established presence in the Americas sustained a third quarter of positive post- $12.2 IBM Americas coupled with improving demand from recessionary revenue growth in 4Q10, driven by billion consumers to drive growth in the region. increased demand for high-end hardware. Apple has more than doubled its potential U.S. Apple is pushing iPad and iPhone sales to drive market, and much more than doubled the part of $12.1 Apple growth, namely via expanded retail coverage, to the U.S. market it has penetrated, with its Verizon billion drive growth in the Americas. iPhone; TBR expects this to yield increased revenue from the Americas in coming quarters. Americas Revenue Growth Leaders Company Growth Key Strategies Drivers & Changes Apple is pushing iPad and iPhone sales and Apple leveraged a strong retail presence to combat Apple 57.3% expanding its retail coverage to drive growth in the the maturity of key devices in the U.S. market and Americas. drive strong growth in the Americas. Drive PC sales to private sector customers in the In the face of decreased federal spend, Panasonic Panasonic 24.9% U.S. to capitalize on the enterprise PC refresh cycle leaned on strengthened enterprise demand in the and combat restricted government IT spend U.S. to drive growth in the Americas. AMD innovates and forges strategic partnerships to AMD rolled out its Fusion technology and joined the differentiate its product portfolio and increase its Multicore Association’s Board in 4Q10 to drive AMD 21.6% marketing capabilities to position for growth in the increased unit shipment and revenue growth in the Americas. Americas.27 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  28. 28. Geographic View: Americas TBRStrategic partnerships and strong demand in growth markets remainthe key to growth in the Americas for hardware vendorsTrends & Outlook• Growth in emerging markets such as Latin America continued to outpace mature markets, including the U.S. Hardware vendors are working to expand their presences and increase sales in these countries to offset weak customer spending in mature markets and drive growth in the Americas.• Vendors continued utilizing partnerships to cost effectively increase their addressable customer base via distribution and carrier agreements, such as Apple’s alliance with Verizon, and new technologies.• TBR anticipates improved performance in the Americas entering 1H11, predicated on resumed spending by consumer and public sector customers. We expect CBQ vendors to leverage product development, marketing and alliances to capitalize on demand for additional IT infrastructure and storage.Portfolio/GTM & RM Changes Key 4Q10 M&As, Alliance Changes & DealsCompany TBR Insights Company TBR Insights Fujitsu appointed Rich Marcello as executive VP of Platforms HP announced Ingram Micro as its Products to drive sales and revenue growth in North America. first authorized distributor of HPFujitsu Visual Collaboration Christer Bergman was appointed to Fujitsu Frontech North HP videoconferencing solutions, to America Inc. and will head the development of PalmSecure access Ingram’s network of value- technology. added resellers in the U.S. Panasonic opened a 3-D innovation center at its Hollywood Fujitsu entered the U.S. smart meterPanasonic Laboratory in Nevada to capitalize on growing consumer market in 4Q10 as a result of a deal demand for 3-D technology. Fujitsu with New Mexico-based Kit Carson Toshiba America Information Systems rolled out IP 5000-series Electric.Toshiba business phones, which appeal to SMBs via increased In signing a deal with Verizon, Apple affordability. has more than doubled its potential Intel is constructing a factory in Oregon, slated to be U.S. market for iPhone sales, and Apple much more than doubled the part of operational by 2013, to handle 450mm wafers for decreasedIntel manufacturing costs as part of an ongoing $6 billion to $8 the U.S. market it has yet to billion investment to upgrade U.S. facilities to 22nm penetrate. production.28 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  29. 29. Geographic View: EMEA TBRHardware vendors strive for increased traction in EMEA to overcome weakcustomer spending, particularly in the consumer market, and drive growth• High volatility in European TBR 4Q10 EMEA REVENUE GROWTH VS. CORPORATE REVENUE GROWTH markets resulted in the CBQ average EMEA revenue Average EMEA Revenue 80% growth declining to the Growth = 7.3% single digits in 4Q10. TBR anticipates improved 60% Apple performance in coming Corporate Revenue Growth quarters in tandem with 40% economic recovery. Panasonic EMC NetApp Lenovo• Pure-play vendors, including Apple, NetApp, 20% Intel Toshiba HDS HDS and Lenovo, overall Fujitsu IBM fared the best in terms of Sony 0% AMD growth; TBR believes -40% -30% -20% -10% 0% HP 10% 20% 30% 40% 50% 60% Dell customers in EMEA are Acer Average Corporate Revenue Growth for Segment = 11.1% spending incrementally to -20% SOURCE: TBR sustain their IT operations, Oracle/Sun EMEA Revenue Growth with a focus on cost- -40% effective hardware that NOTE: SPHERE SIZE DEPICTS SIZE OF REVENUE. boosts business process . efficiency to drive growth.29 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  30. 30. Geographic View: EMEA TBRHardware vendors are increasing their channel presences within EMEAto drive revenue in the region amidst uncertain economic conditionsEMEA Revenue LeadersCompany Size Key Strategy Drivers & Changes Strong alliances and traction in channel partner relationships enhance HP’s position as a provider of Revenue from EMEA contributed 38.0% to total $12.3HP affordable solutions that simplify operations and help revenue, up 100 basis points sequentially, while billion customers prepare for growth, encouraging spending declining 100 basis points annually. amidst economic recovery in the EMEA region. $9.5 Leverage strong traction in EMEA to overcome overall IBM posted strong performance in Italy andIBM billion market uncertainty and drive sales in the region France during 4Q10. Employ strong retail presence and channel alliances to Economic recovery and resulting increased $7.9Apple meet high demand for the iPhone 4 and iPad in EMEA, consumer spending are yielding strong growth billion driving revenue and unit shipment growth. in EMEA for Apple.EMEA Revenue Growth LeadersCompany Growth Key Strategy Drivers & Changes Leverage new product releases – namely the iPad and Apple leveraged iAd expansion to Europe and iPhone 4 – to capitalize on increased consumer increased demand for the iPhone and iPad toApple 49.2% spending during economic recovery and sustain strong overcome market contraction and maintain growth double-digit EMEA growth. Invest in countries with stronger economies such as Despite a weak macroeconomic environment,NetApp 34.8% Germany to offset weaker markets, namely in Southern the EMEA region led NetApp’s segments in Europe, and maintain growth in EMEA growth as spending picked up through 4Q10. Panasonic maintained double-digit growth in Increase presence in emerging markets in EMEA to Europe on the back of an enterprise IT refreshPanasonic 15.6% overcome shaky macroeconomic conditions and sustain cycle driven by improving economies in the strong revenue growth in the region region.30 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.
  31. 31. Geographic View: EMEA TBRVendors extend their reach into growth markets such as mobile devicesvia R&D and channel and technology alliances to spur demand in EMEATrends & Outlook• TBR estimates EMEA revenue growth to improve with economic recovery in EMEA, primarily due to demand for critical IT upgrades, particularly in the enterprise and SMB markets.• Vendors augmented internal R&D spend with technology partnerships to penetrate key growth markets such as Internet-connected TV within EMEA, laying the foundation for unit shipment and revenue growth.• We anticipate hardware vendors will continue pursuing alliances to cost-effectively expand their channel presence in EMEA with a focus on the region’s growth countries, helping spur increased customer spend. Portfolio/GTM & RM Changes Key 4Q10 M&As, Alliance Changes & Deals Company TBR Insights Company TBR Insights Toshiba is set to release the newest version of Intel partnered with Bang & Olufsen, a Toshiba its tablet PC exclusively in EMEA during 1H11. Denmark-based provider of high-end video and audio products, to develop devices Intel enabling Internet-connected TV and gain To capitalize on growing demand for mobility within the healthcare market, Dell piloted a traction in the key growth market within Dell the region. mobile clinical computing solution at 10 European hospitals in 4Q10. Sony partnered with Spotify to promote To enhance its position as a provider of market expansion of its subscription-based music business in Europe. TBR believes affordable solutions that simplify operations Sony Sony’s Music Unlimited Powered By and help customers prepare for growth, and Qriocity will augment declining revenue in HP drive spending amidst economic recovery, HP the physical music business. launched the EMEA SMB Networking program for channel reseller partners.31 April 2011 TBR CBQ End-of-Quarter Benchmark Report | 4Q10 ©2011 Technology Business Research, Inc.